An Introduction to POS Terminals: What They Are & How They Work

You’re considering getting a POS terminal for your business but before you do you need answers to some key questions. Let’s get started.

What is a POS Terminal?

To understand what a POS terminal is you need to break it down into two parts.

The first part is POS. It stands for “point of sale” and refers to where your customers complete their purchase. This can be at a checkout counter in a brick and mortar location, stand, booth, or pop-up store.

The second part is the terminal. Think of it as a digital cash register. It can be a countertop device or an app that you use on a tablet or smartphone like the OTT Pay Smart POS Terminal.

How does a POS Terminal work?

The way a POS terminal works is very straightforward.

• Enter — When a customer comes up to make their purchase the barcode or QR code on the item is entered in the POS terminal manually or by scanning it.
• Calculate & Update — The POS terminal then automatically populates the price of the item, including the taxes if applicable. The system also updates your inventory count to indicate that the item has been sold.
• Payment — A POS terminal can accept payment in a variety of ways. Cash, credit card, tap card, debit card, loyalty points, gift card, and payments from a digital wallet can all be accepted. The OTT Pay POS terminal even accepts payments from international digital wallets such as Alipay and WeChat Pay from China.
• Finalization of the Sale — To complete the sale, if it’s not a cash purchase, the customer’s financial institution must authorize the transaction. Once you receive confirmation that the payment has gone through, the POS terminal creates a receipt which can be printed or emailed to the customer.

How much does a POS Terminal cost?

Determining how much your POS terminal setup will cost will depend on what you’ll need to complete your package.

A basic POS terminal payment system can be as simple as a card reader for accepting payments. This is usually ideal for tradespeople — like a contractor, electrician or plumber or a vendor operating a booth at a farmer’s market or show.

The cost for your POS terminal setup will increase if you need additional hardware to augment the basic requirements.

Those elements can include:

• Barcode/QR code scanner
• Monitor
• Tablet Stand
• Cash Drawer
• Card Reader
• Receipt Printer

Once you have your POS terminal and any supporting hardware setup, the cost to use most providers system will be based on one of two options:

• A monthly subscription fee or,
• A percentage and transaction fee on each sale.

And one last point. Most modern day POS terminals are cloud-based, which means you can install them yourself to whichever internet-connected devices you plan to use. This will save you a considerable amount of money vs. going with a server-based POS terminal which requires a technician to set it up.

What to Consider when Comparing POS Terminals

To assist you in researching and comparing POS terminals so you can make an informed decision and choose the one that’s the best fit for your business, here are 11 suggested steps to follow.

1. Define business needs & goals

• Type of Business — Retail, hospitality, service, hybrid, mobile, etc.
• Sales Volume — High or low ticket? High-frequency sales?
• Number of Locations — Single site vs. multi-location or franchise.
• Mobility Needs — In-store only, mobile/tablet use, curbside, events?
• Key Goals — Improve efficiency, inventory control, customer data, reporting?

2. Map out key POS terminal features you need

Consider essential and optional features:

• Core Features: Sales processing, inventory management, employee management, tax calculation.
• Industry-Specific Tools:
  • Retail: Barcode scanning, stock alerts, loyalty programs.
  • Restaurant: Table management, kitchen display, modifiers.
  • Service-based: Appointment scheduling, invoicing.
• Multi-Device Compatibility: Android, iOS, browser-based access.
• Offline Mode: Can it process sales during internet outages?
• Omnichannel Support: Sync with your e-commerce platform?

3. Compare the costs (upfront and ongoing)

• Hardware: Terminals, printers, cash drawers, barcode scanners, tablets.
• Software Fees: Monthly subscription, per-location fees, feature tiers.
• Transaction Fees: Payment processing rates — flat rate vs. interchange-plus.
• Maintenance/Support: Is 24/7 support included or extra?

4. Assess hardware requirements

• Will the POS vendor supply hardware?
• Can you use your existing devices?
• Do you need:
  • Touchscreen terminals?
  • Mobile readers?
  • QR Code Scanning?
  • Self-checkout kiosks?
• Ensure devices support EMV (chip cards), tap (NFC), QR Code scanning, and mobile wallets.

5. Confirm cloud-based benefits are in place

• Real-time sync across locations
• Remote access to reports, sales, and staff data
• Automatic updates and backups
• Role-based access for team members

6. Review data and reporting features

• Customizable sales dashboards
• Inventory aging reports
• Staff performance metrics
• Customer purchasing trends
• Export options (CSV, PDF, integrations)

7. Check for integration capabilities

• Accounting: QuickBooks, Xero
• E-commerce: Shopify, WooCommerce, BigCommerce
• Marketing: Mailchimp, loyalty platforms
• Inventory: DEAR, Finale, TradeGecko
• CRM: HubSpot, Salesforce (if applicable)

8. Verify compliance and security standards

• PCI-DSS compliance
• GDPR (if dealing with international customers)
• End-to-end encryption
• Tokenization of card data
• Dynamic Pin Pad entry

9. Demo at least 3 POS terminals

• Request demos from at least 3 vendors.
• Evaluate user experience, dashboard layout, and ease of use.
• Ask about:
  • Downtime history
  • Support response time
  • Scalability

10. Read customer reviews and case studies

• Pay attention to complaints about:
  • Customer support
  • Hidden fees
  • Slow performance

11. Compare contracts and service agreements

• Review terms for:
  • Subscription cancellation
  • Data ownership
  • Hardware returns/refunds
• Ask for month-to-month options or flexible contracts.

How to Apply and get a POS Terminal

Applying for a POS terminal is as simple as visiting the website of the provider you’ve decided to go with and filling out an online form.

What happens next?

• Payments can be accepted — The operations teams will integrate your payment device with your bank account and send it to you. The device is plug-and-play so it will be ready to use and able to receive payments right out of the box.
• Your needs are determined — A few days after applying online you’ll be contacted by a sales rep to discuss what product(s) best suit your needs. You’ll also be asked for documents which will be submitted to the operations team.
• Contract is signed — Operations will then generate a contract for you to sign which will include terms & conditions, and monthly and transaction rates.
• Payment methods are setup — The signed contract will then be submitted and operations will submit applications for Global Payments and Chinese Mobile Payments. Once these applications are approved, you will receive a confirmation letter from support.

Choosing the right POS terminal for your business

Now that you understand what a POS terminal is, how it works, and what to consider before making a purchase, you’re in a strong position to choose the right system for your business. Whether you’re running a retail shop, managing a restaurant, or selling on the go, the right POS terminal will streamline your operations, improve accuracy, enhance inventory control and give you valuable insights into your sales and customers.

Include the OTT Pay Smart POS Terminal to your Consideration List

When compiling your shortlist of POS machines to review be sure to include the OTT Pay Smart POS Terminal. It accepts the widest range of payment methods including major debit and credit card brands and popular international e-wallets with over 1 billion users.